Digital First Media decides not to sell entire company

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Workers begin installing a new San Jose Mercury News sign high atop the 13-story Legacy Towers building in downtown San Jose, Calif., on Tuesday, Sept. 30, 2014. Aaron Henry hands part of a letter "T" to Nick Taisler and Ramon Mendoza. (Karl Mondon/Bay Area News Group)

Digital First Media, the company that operates the Bay Area News Group and its digital and newspaper properties, including this newspaper, has decided not to seek a sale of the entire company, saying it “is not in the best interest of shareholders at this time.”

The company, in a memo to employees, also announced that company executive Steve Rossi, who is based in San Jose, will assume leadership of DFM in July. John Paton, who now is chief executive, is retiring from DFM.

Rossi is president and chief operating officer of DFM, which manages more than 800 print and online products serving 67 million readers each month. He also serves as president and CEO of the California Newspapers Partnership, which owns and manages 34 daily newspapers, including the San Jose Mercury News, Contra Costa Times and Oakland Tribune, and is the largest newspaper company in California. Rossi previously held management positions with Knight Ridder, the second-largest U.S. newspaper publisher at the time.

In September, DFM launched a wide-ranging review to seek strategic alternatives for the company, including a sale of all or parts of the firm.

“While the review process is not complete, it has been determined that a sale of the company as previously speculated is not in the best interest of shareholders at this time,” Rossi and Paton said in their memo to employees.

“Every newspaper company in the world is suffering from too much debt, but that is not the case with our company,” Paton said in an interview with the Bay Area News Group. “Our profit performance has been very strong and to the point where we have more cash on our balance sheet than our debt. That gives us a ton of flexibility. We are a unicorn in the newspaper industry.”

Acquisitions are a potential part of the picture.

“We will invest in digital, buy the right things, and in some cases, sell the right things,” Paton said.

Despite the improved financial picture, it will continue to keep a tight rein on expenses.

“Profit is up year over year, we are putting profit-sharing back into the hands of employees,” Paton said. “But we still have to go about cost-cutting because restructuring is necessary at a legacy media company.”

Paton will remain CEO through June 30 and Rossi will assume leadership of the company July 1.

“It’s likely that there will be some sales of clusters of newspapers,” said Ken Doctor, a Santa Cruz-based media analyst. “The question is when those sales of clusters might occur.”

“DFM could continue to manage its current cash flow, and there is no reason that they have to sell,” Doctor said. “But the current owner, Alden Capital, doesn’t want to be in the business of owning newspapers long term.”

After leaving DFM, Paton will shift to a full-time role with IVA Ventures.

DFM expects to work with IVA Ventures to identify products to accelerate the newspaper company’s growth.

“There is always horse trading of assets that goes on in the newspaper business,” Paton said. “We will be doing some of that. But that is not the key focus of what we are going to be doing.”

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